Many medical practice owners are required to undergo an annual audit of their financial statements when they’ve borrowed money from a bank or other financial institution, have outside investors, or are considering selling their practice. These steps will help you reduce the expense of an audit and prevent disruption to your operation.
Ellen Bartholemy, CPAMany medical practice owners are required to undergo an annual audit of their financial statements when they’ve borrowed money from a bank or other financial institution, have outside investors, or are considering selling their practice. These steps will help you reduce the expense of an audit and prevent disruption to your operation.
Your goal in preparing for a financial audit should be to achieve a quick result at a low cost. You can achieve this goal by being prepared and by fostering an attitude of cooperation and communication.
Unlike an IRS audit, the relationship with a financial auditor should not be an adversarial one. If you and your staff work together with the auditors, you can make the process more effective and efficient, thereby reducing fees and the time to complete the audit.
The tips below will help complete the audit efficiently.
Designate a point person who will be responsible for providing the auditors with access to records and files and for directing them to the appropriate individuals to answer questions or explain operations. Providing a main point of contact will also minimize duplications and omissions.
Make sure you explain to your staff why the audit is happening and how important it is to cooperate. This will ensure the audit will proceed quickly and efficiently.
Prior to the auditors beginning their work, arrange a meeting so they can meet the office staff and develop a rapport.
This planning meeting should include a discussion of the expected timelines, the information they will need, who will be responsible to provide the information, and by what date.
If possible, provide an overview of your practice’s functions and a tour of the facility so that the auditors can get a perspective on your overall operations.
Request a list of schedules, working papers and documents the auditors will need from your records. Providing this information will make the audit more efficient, which will help to keep the cost down.
Ask the auditor in which format they would like the records. Many auditors today use paperless filing systems for their working papers. If so, you should provide the working papers in electronic format. They can be sent via email and password-protected or through a secured server.
If you can have everything ready for the auditors when they start their work, it will maximize their efficiency.
Prepare a working paper for every balance sheet account. The working papers should reconcile the supporting documentation to the general ledger account.
Prepare a draft of the practice’s financial statements and complete the supporting schedules. Documenting your more complex processes, such as medical insurance filing, with a flowchart is a very effective way to communicate them to the auditor.
Meeting with the auditors periodically during the audit process will allow you to stay informed and resolve issues in a timely manner.
Ellen Bartholemy is the director of accounting services at Hall & Company, CPAs, in Irvine, California. Send your practice management questions to firstname.lastname@example.org.